An Imex-Based Approach for the Pricing of Equity Warrants Under Fractional Brownian Motion Models
WENTING CHEN,
XIAOYING JIANG
Abstract:In this paper, the pricing of equity warrants under a class of fractional Brownian motion models is investigated numerically. By establishing a new nonlinear partial differential equation (PDE) system governing the price in terms of the observable stock price, we solve the pricing system effectively by a robust implicit-explicit numerical method. This is fundamentally different from the documented methods, which first solve the price with respect to the firm value analytically, by assuming that the volatility … Show more
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